European Investment Bank to introduce new debt product

European Investment Bank to introduce new debt product

Finance

The European Investment Bank (EIB) announces on the margins of the IMF / World Bank Group Spring Meetings plans for a new debt product: a Sustainability Awareness Bond, highlighting the Bank’s key role in sustainable finance both in and outside of Europe.

The aim is to support the achievement of the United Nations Sustainable Development Goals by further unlocking investment in social, green and sustainable projects.

Speaking ahead of a debate co-hosted by the EIB and the Washington DC based Brookings Institution on “A new EIB bond product in support of the Global Goals: Building a sustainable financial system”, EIB President Werner Hoyer said, “With our new Sustainability Awareness Bond we hope also to launch a new dialogue on sustainable investment. We want to discuss how we can contribute to raising the trillions that we know are needed to tackle poverty, raise living standards and combat disease around the world. This is also a debate about impact, transparency, and reaching out to new investors.”



He added, “Through the development of the Green Bond market which we pioneered 11 years ago, we have seen the hugely positive impact of engagement by the financial markets. Green Bonds have created a new way to connect investors with green assets and put the issue of green investment at the heart of the climate change agenda globally. Capital market engagement has definitely helped boost the prominence of environmental matters in the policy arena. Now, as the bank of the European Union, we can build on this success. We want to go further still to support the international development effort and specifically the UN’s Sustainable Development Goals.”

The Administrator of the United Nations Development Programme (UNDP), Achim Steiner, welcomed the announcement. Speaking alongside Dr Hoyer at the event he said, “The scale of the challenge we face in delivering on the Sustainable Development Goals is immense, and the contribution that financial markets can make in achieving the global goals is considerable. That’s why UNDP welcomes today’s initiative by the European Investment Bank for a new sustainable development bond to specifically support the Global Goals and sustainable investment in social projects that will help achieve these goals.“

Valdis Dombrovskis, Vice-President of the European Commission, said, “The European Union is leading the way in creating an international system for green and sustainable finance. The EIB is a pioneer in the area. The bank launched the world’s first green bond in 2007, and remains one of the most active green bond issuers. I welcome the EIB’s Sustainability Awareness Bond and the support that it brings to achieving the sustainable development goals.“

The new Sustainability Awareness Bond, currently being prepared by the Finance and Projects Directorates of the European Investment Bank, will initially focus on activities in the water sector, and then encompass activities in other areas with positive social impacts, such as health and education. Activities in the water sector were selected at first as the EIB has considerable experience and available reporting indicators allowing the bank to evaluate its financing impact on reaching several SDGs linked to this sector.

The first issuance of the new Sustainability Awareness Bond is expected to take place this autumn. While the EIB’s Green Bonds (or Climate Awareness Bonds, CABs) focus on climate action-related investment, the new product will have a wider scope. It will however maintain the clarity of criteria, definitions and reporting requirements that have contributed to the success of the CABs.

The United Nations estimates that around 6 trillion USD will be needed annually over 15 years to achieve the Sustainable Development Goals. The European Union, aims to support this effort partly through its new Sustainable Finance Action Plan , which aims to redirect capital flows towards sustainable investment, achieving sustainable and inclusive growth, managing risks stemming from climate change, resource depletion or social issues and fostering transparency and more long-term thinking in finance. Given that the EIB as the EU Bank will be heavily involved here, this Action Plan provides the perfect context to develop a financial product to tackle these challenges.